Struggling Zynga names Microsoft exec Mattrick as CEO

Jul. 2, 2013
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Don Mattrick, president of Microsoft's interactive entertainment business, introduces the new Xbox One system on Tuesday May 21, 2013 at Microsoft Studios in Redmond, Wash. / Stephen Brashear Invision for XBOX

by Scott Martin and Jon Swartz, USA TODAY

by Scott Martin and Jon Swartz, USA TODAY

SAN FRANCISCO - Is it a whole new game for struggling social-games maker Zynga?

Shares of Zynga today closed up more than 10% on news that founder Mark Pincus would step down as CEO amid mounting Wall Street pressures to correct the company's course.

Zynga said that Don Mattrick, who led Microsoft's Xbox business for the past three years, will take the top job at the struggling online games giant. Pincus will remain as chairman and chief product officer.

"He turned Xbox into the world's largest console-gaming network, growing its installed base from 10 to 80 million and transformed that business from deep losses to substantial profits," Pincus said in a statement.

"Zynga is a great business that has yet to realize its full potential," Mattrick said in an internal e-mail to Zynga employees.

EXECUTIVE COURTSHIP

Zynga's interest in Mattrick stretches back nine months, but only got serious in the spring when he and Pincus started working out parameters over an executive partnership, according to two sources with knowledge of the discussions.

That partnership hinges on Mattrick running day-to-day operations while Pincus focuses on product development, which he has done at Zynga for years.

The sources, who asked not to be identified, said Mattrick was the only person Zynga considered as CEO. Mattrick has been a hot CEO candidate for the past year and linked to several jobs, including his former employer, Electronic Arts.

How the strong-willed Pincus and Mattrick divide duties is also the subject of conjecture among analysts.

"What's (Mattrick's) assurance that Pincus won't be meddling?" Wedbush Securities analyst Michael Pachter says, ticking off a number of Zynga execs who recently left, including the former chief financial officer and chief operating officer.

"Content is the lifeblood of Zynga, so how will decisions on games be made going forward?" says Rich Greenfield, an analyst at BTIG.

PINCUS PRESSURES

Zynga' CEO shuffle caps the end of a tumultuous tenure for Pincus, beset with executive defections and morale woes during his leadership. The company's stock price - a recruiting and retention carrot - has languished well below its IPO price of $10.

Wall Street analysts have in recent quarters grown restless for signs that Zynga would reverse its falling revenue course.

The blow to Microsoft's executive ranks comes as Zynga continues to face flagging user interest for its social games and heated competition. Microsoft did not respond to requests for comment.

Last month, Zynga slashed 520 jobs in a bid to shave costs as it scrambles to gain traction in new game titles.

Mattrick has been the executive behind such hit titles as Need for Speed, FIFA and The Sims. Before Microsoft, he was president of worldwide studios for Electronic Arts. He has been with Microsoft for the past six years.

"Don Mattrick joining Zynga as its CEO is a spectacular coup for the company, its shareholders and for Mark. There is not another executive in the world who could bring as much experience, knowledge and success in the gaming space," said Jeffrey Katzenberg, a Zynga board member and CEO of DreamWorks Animation SKG, in a statement.

Zynga is scheduled to report earnings after the close of markets on July 25.

ZYNGA 2.0

In April, Zynga reported a first-quarter revenue slide to $264 million from $321 million in the same period a year before. Zynga's monthly active users slipped 13% from a year ago, while the company guided for a second-quarter net loss ranging from $26.5 million to $36.5 million.

Zynga has moved fast to revamp its business. The company has unleashed the first of a barrage of so-called midcore titles. Such games are intended to bridge hardcore console ones to the casual social games Zynga is best known to serve its audience.

War of the Fallen came out in mid-April in what will be closely watched as the first sign of a turnaround. The company still remains focused on its more casual titles as well, launching Draw Something 2 in April.

The big test of Zynga's turnaround effort will come with its games Battlestone, which made its debut in May, and Solstice Arena. They will go a long way toward determining the company's success or failure in the midcore genre. In all, several other midcore games from Zynga are expected by year's end.

Zynga has also had to remake itself while shedding underperforming studios. The company announced plans in May to shutter The Ville, Empires & Allies and Dream Zoo. In the last seven months, it has shuttered at least 18 titles.

Meanwhile, Zynga faces a wave of game developers from Asia and the United Kingdom, as well as from traditional giants such as Electronic Arts, while transforming its business to compete in mobile.

U.K. game developer King.com's Candy Crush Saga has been a chart burner, topping as the No. 1 grossing app on iPhones. Last month, reports surfaced that King.com has hired bankers in anticipation of an IPO.

Mattrick, who is highly respected in the gaming field, has at least one major proponent from the outside looking in.

"From his time at Electronic Arts to his unparalleled contributions at Microsoft, Don Mattrick has been both a friend and a profound influence - not only on me, but on the interactive world as a whole," Steven Spielberg said in a quote e-mailed to USA TODAY. "Zynga is about to experience why all of us have admired and enjoyed working with Don over the years."